Corporate governance report

Board membership criteria

The nominations committee works with the entire Board to determine the appropriate characteristics, skills and experience required for the Board as a whole as well as its individual members. Board members are expected to possess the expertise, skills and experience required to manage and guide a high-growth, high-tech IT services company, deriving revenue primarily from G-7 countries. Expertise in strategy, technology, finance, quality and human resources is essential. Generally, the members are between 40 and 60 years of age, and are not related to any executive directors or independent directors. They are not expected to serve in any executive or independent position in any company that is in direct competition with us. Board members are expected to rigorously prepare for, attend and participate in all Board and applicable committee meetings. Each member is expected to ensure that their other current and planned future commitments do not materially interfere with their responsibilities with us at Infosys.

Selection of new directors

The Board is responsible for the selection of new directors. The Board delegates the screening and selection process involved in selecting new directors to the nominations committee, which consists exclusively of independent directors. The nominations committee in turn makes recommendations to the Board on the induction of any new directors.

Membership term

The Board constantly evaluates the contribution of the members and periodically makes recommendations to the shareholders about re-appointments as per statute. The current law in India mandates the retirement of one-third of the Board members (who are liable to retire by rotation) every year, and qualifies the retiring members for re-appointment. Executive directors are appointed by the shareholders for a maximum period of five years at a time, but are eligible for
re-appointment upon completion of their term.

Non-executive / independent directors do not have a specified term, but retire by rotation as per law. The nominations committee of the Board recommends such appointments and re-appointments. However, the membership term is limited by the retirement age for members.

Retirement policy

Under this policy, the maximum age of retirement for executive directors is 60 years, which is the age of superannuation for our employees. Their continuation as members of the Board upon superannuation / retirement is determined by the nominations committee. The age limit for serving on the Board is 65 years. The age limit for the independent chair is 70 years.

Succession planning

The nominations committee constantly works with the Board to evolve succession planning for the positions of the Chairman, CEO, COO and CFO and also develop contingency plan for interim succession for any of them, in case of any exigencies. The Board, if required, may increase the review frequency of the succession plan.

Board compensation policy

The compensation committee determines and recommends to the Board the compensation payable to the directors. All Board-level compensation is approved by the shareholders and separately disclosed in the financial statements. Remuneration of the executive directors consists of a fixed component and a performance incentive. The compensation committee makes a quarterly appraisal of the performance of the executive directors based on a detailed performance-related matrix. The annual compensation of the executive directors is approved by the compensation committee, within the parameters set by the shareholders at the shareholders' meetings.

The compensation payable to the independent directors is limited to a fixed amount per year as determined and approved by the Board, the sum of which is within the limit of 1% of our net profits for the year, calculated as per the provisions of the Companies Act, 1956. The performance of independent directors is reviewed by the entire Board on an annual basis.

Cash compensation paid to directors in fiscal 2010

in Rs. crore

Name of the director

Fixed salary

Basic salary

Perquisites / Allowances

Retiral benefits

Total fixed salary

Bonus /Incentives

Commission

Total

Notice period
(in months)

Founder and non-executive director

N. R. Narayana Murthy

–

–

–

–

–

0. 57

0.57

NA

Founders and whole-time directors

Nandan M. Nilekani(1)

0.09

0.03

0.02

0.14

0.20

–

0.34

NA

S. Gopalakrishnan

0.32

0.12

0.08

0.52

0.49

–

1.01

6

S. D. Shibulal

0.31

0.10

0.07

0.48

0.47

–

0.95

6

K. Dinesh

0.32

0.12

0.08

0.52

0.49

–

1.01

6

Whole-time directors

T. V. Mohandas Pai

0.36

0.14

0.09

0.59

2.54

–

3.13

6

Srinath Batni

0.36

0.14

0.09

0.59

1.82

–

2.41

6

Independent directors

Deepak M. Satwalekar

–

–

–

–

–

0.60

0.60

NA

Prof. Marti G. Subrahmanyam

–

–

–

–

–

0.65

0.65

NA

Dr. Omkar Goswami

–

–

–

–

–

0.52

0.52

NA

Rama Bijapurkar(2)

–

–

–

–

–

0.49

0.49

NA

Claude Smadja

–

–

–

–

–

0.59

0.59

NA

Sridar A. Iyengar

–

–

–

–

–

0.62

0.62

NA

David L. Boyles

–

–

–

–

–

0.59

0.59

NA

Prof. Jeffrey S. Lehman

–

–

–

–

–

0.61

0.61

NA

K. V. Kamath(3)

–

–

–

–

–

0.39

0.39

NA

Notes : None of the above directors are eligible for any severance pay and none of them hold any stock options as at March 31, 2010.(1) For the period April 1, 2009 to July 9, 2009.(2) Ceased to be a director with effect from April 13, 2010.(3) For the period May 2, 2009 to March 31, 2010.

Shares and options held by non-executive / independent directors as at March 31, 2010

Equity shares (no.)

ADS
(no.)

N. R. Narayana Murthy

23,79,672

–

Deepak M. Satwalekar

56,000

–

Prof. Marti G. Subrahmanyam

–

17,500

Dr. Omkar Goswami

12,300

–

Rama Bijapurkar(1)

7,100

–

Claude Smadja

3,900

–

Sridar A. Iyengar

–

–

David L. Boyles

–

2,000

Prof. Jeffrey S. Lehman

–

–

K. V. Kamath

–

–

(1) Ceased to be a director with effect from April 13, 2010.

Non-executive / independent directors' remuneration

Section 309 of the Companies Act, 1956, states that a director who is neither in the whole-time employment of the Company nor a managing director may be paid remuneration by way of commission, if the Company, by special resolution, authorizes such payment. Members of the Company at the Annual General Meeting held on June 22, 2007, approved payment of remuneration by way of commission to
non-executive directors, at a sum not exceeding 1% per annum of our net profits. We have paid Rs. 5.63 crore (US $1,248,750) as commission to our non-executive directors. The aggregate amount was arrived as per the following criteria :

in Rs. crore

US $

Commission (fixed)

0.33

75,000

Variable attendance fee(1)

0.02

5,000

Chairperson of the Board

0.11

25,000

Lead Independent Director

0.06

15,000

Chairperson – audit committee

0.08

20,000

Members – audit committee

0.04

10,000

Chairperson – other committees

0.02

5,000

Members – other committees

0.01

2,500

Notes : 1 USD = Rs. 44.90(1) Variable attendance fee is based on the attendance at the Board meeting(s).

Independent directors based overseas and traveling to India to attend Board meetings will be eligible to receive an additional US $5,000 per meeting. This is based on the fact that these independent directors have to spend at least two additional days in travel while attending board meetings in India.

The Board believes that the above commission structure is commensurate with global best practices in terms of remunerating non-executive / independent directors of a company of similar size and adequately compensates for the time and contribution made by our
non-executive / independent directors.

Memberships in other boards

Executive directors may, with the prior consent of the Chairperson of the Board of Directors, serve on the Board of two other business entities, provided that such business entities are not in direct competition with our business operations. Executive directors are also allowed to serve on the boards of corporate or government bodies whose interests are germane to the future of the IT and software business, or the key economic institutions of the nation, or whose prime objective is benefiting society. Independent directors are not expected to serve on the Boards of competing companies. Other than this, there are no limitations except those imposed by law and good corporate governance practices. The outside directorships held by each of our directors are listed in the Composition of the Board and Directorships table in this section.

B. Board meetings

Scheduling and selection of agenda items for Board meetings

Dates for Board meetings in the ensuing year are decided in advance and published as part of the Annual Report. Most Board meetings are held at our registered office at Electronics City, Bangalore, India. The Chairperson of the Board and the Company Secretary draft the agenda for each meeting, along with explanatory notes, in consultation with the CEO and the Lead Independent Director, and distribute these in advance to the directors. Every Board member can suggest additional items for inclusion in the agenda. The Board meets at least once a quarter to review the quarterly results and other items on the agenda, and also on the occasion of the Annual General Meeting of the shareholders. Additional meetings are held, when necessary. Independent directors are expected to attend at least four Board meetings in a year. However, the Board being represented by independent directors from various parts of the world, it may not be possible for each one of them to be physically present at all the meetings. We use video / teleconferencing facilities to enable their participation. Committees of the Board usually meet the day before the formal Board meeting, or whenever the need arises for transacting business. Six Board meetings were held during the year ended March 31, 2010. These were held on April 15, 2009; May 02, 2009; June 20, 2009 (coinciding with last year's Annual General Meeting of the shareholders); July 10, 2009; October 9, 2009 and January 12, 2010.

Attendance of directors during fiscal 2010

Name of the director

No. of meetings

Held

Attended

N. R. Narayana Murthy

6

6

Nandan M. Nilekani(1)

3

2

S. Gopalakrishnan

6

6

Deepak M. Satwalekar

6

5

Prof. Marti G. Subrahmanyam

6

5

Sridar A. Iyengar

6

6

Dr. Omkar Goswami

6

4

Rama Bijapurkar(2)

6

5

Claude Smadja

6

5

David L. Boyles

6

5

Prof. Jeffrey S. Lehman

6

5

K.V. Kamath(3)

4

4

K. Dinesh

6

6

S. D. Shibulal

6

6

T. V. Mohandas Pai

6

6

Srinath Batni

6

6

Notes : All of the above directors attended the Annual General Meeting held on June 20, 2009.(1) Ceased to be a director with effect from July 9, 2009.(2) Ceased to be a director with effect from April 13, 2010.(3) Appointed as director with effect from May 2, 2009.

Availability of information to Board members

The Board has unfettered and complete access to any information within the Company, and to any of our employees. At Board meetings, managers who can provide additional insights into the items being discussed are invited.

Regular updates provided to the Board include :

Annual operating plans and budgets, capital budgets and updates

Quarterly results of our operating divisions or business segments

Minutes of meetings of audit, compensation, nominations, risk management and investor grievance committees as well as abstracts of circular resolutions passed

The Board minutes of the subsidiary companies

General notices of interest received from directors

Dividend data

Information on recruitment and remuneration of senior officers just below the Board level, including appointment or removal of the CFO and Company Secretary

Materially important litigations, show cause, demand, prosecution and penalty notices